Extreme Makeover: Canal edition
The lyrics from the eponymous Van Halen song could just as easily be the nation’s port policy – if the country had one.
Panama is nearing completion of retrofitting the Panama Canal to accommodate much larger ships. The prospect of these ships calling on the East and Gulf Coasts has every port authority from New York to Corpus Christi salivating. But to fully accommodate these larger ships, you need deeper channels. This looming reality has kicked off a race to the bottom among the ports.
There are three big problems. No. 1: There’s no guarantee that these larger ships will use the Panama Canal route. No. 2: Not all ports are the same and there are geographical and logistical challenges to some ports becoming “hubs.” No. 3: The nation doesn’t need a dozen deepwater ports along the East and Gulf Coasts.
The United States is the world’s second-largest trading nation, after China. And with the country’s large trade deficit (more imports than exports) it’s clear that the world’s goods are going to continue to come here.
But then why is the U.S. port “policy” (a figure of speech as Washington lacks a real policy on ports) to act as a desperate buyer in this situation? Why is Panama’s decision to enlarge its canal dictating U.S. investment decisions? Why are foreign shipping lines’ decisions to build bigger ships dictating U.S. infrastructure?
It’s as if Detroit decided to build wider cars and all the nation’s roads were retrofitted to accommodate them. Actually it’s worse. Ships can offload some cargo before getting to port. In that case, they don’t require the increased channel depth. Technically, even larger ships could potentially still use the existing infrastructure.
The overcapacity of deepwater ports will be a boon for shipping lines. They will be able to play one port against another driving down rates. It will be a buyer’s market, which will actually reduce the revenue to the ports and damage the economic justification that has been used to push the projects.
Deepening doesn’t change the underlying geographic reality. Ports in South Florida are deepening. But we’re talking about trying to attract millions of tons of cargo. It’s not going to stay in South Florida.
The goods are going to be sent around the United States. If you think about it, Miami is about as far from the rest of the country as you can get in the lower 48 states. And that cargo would be moved on the crowded I-95 corridor. Other ports are dozens of miles up rivers from the coast.
Finally, even with a deeper Panama Canal, the booming ports of Los Angeles and Long Beach are still the closest to Asia. Many shipping experts are predicting that an increasing share of national cargo will continue to offload on the West Coast and reach consumers by truck and train.
Nobody likes picking winners and losers. But it’s clear that the nation’s taxpayers will be losers if policymakers don’t come up with a rational prioritization system for pursuing deeper ports. In the end, the marketplace will determine which ports rise and which sink.
Problem is, by that time taxpayers will have paid for a lot of port work for no real reason.
Ryan Alexander is president of Taxpayers for Common Sense